Science:Math Exam Resources/Courses/MATH105/April 2010/Question 05 (c)

MATH105 April 2010

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Question 05 (c)
A person purchased a home at the price of $ 300,000, paid a down payment equal to 20% of the purchase price, and financed the remaining balance with a 25 year term mortgage. Assume that the person makes payments continuously at a constant annual rate $A$ and that the interest is compounded continuously at the rate of 5%. Determine the total interest paid during the 25 year term mortgage.

Make sure you understand the problem fully: What is the question asking you to do? Are there specific conditions or constraints that you should take note of? How will you know if your answer is correct from your work only? Can you rephrase the question in your own words in a way that makes sense to you?

If you are stuck, check the hint below. Consider it for a while. Does it give you a new idea on how to approach the problem? If so, try it!

Hint
How much of each monthly payment is actually going towards the house?

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Solution
Found a typo? Is this solution unclear? Let us know here. Please rate my easiness! It's quick and helps everyone guide their studies. In part (b) we saw that our payments totalled $480,465.25. The house itself had a price of only $300,000. Therefore, the difference of $180,465.25 represents the interest paid during the entire mortgage.

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